non-resident and resident share pre-sale Vancouver condominium
My question is: Applicable to both US and Canada
QUESTION: Hello,
I would appreciate your advice on the following issue:
I am a Canadian resident. Two years ago, I bought a pre-construction apartment in Vancouver jointly (50%-50%) with an American friend of mine who is resident in California with a view to rent it out after completion in 2008. The price of the unit we bought has since gone up considerably.
I have recently come across an article that managing the tax situation could be very complex in our case. I would appreciate if you could advise the steps we should take before and after the completion,renting,and eventually selling of the property. Also, how much would the withholding taxes be if we decide to sell after a year of renting it out or alternatively before renting at all right after completion, or before completion as an assignment. Moreover, I am wondering whether the fact that my partner is American and US resident would complicate my tax situation or obtaining a mortgage from a Canadian bank to finalise the purchase, or both.
Finally, how much would it cost for the matter to be managed by an accountant/tax expert (yourself?)throughout the life of the project.
I look forward to receiving your response.
Many thanks.
Sincerely,
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david ingram replies:
I apologize but this question is far too complex for this free forum. I could spend two hours and still miss the correct answer because I don't have all the facts.
I suggest that the two of you book a conference call with me. The cost would be $424 Canadian for an hour and could likely be dealt with in that time.
Since the tax paid is a progressive tax running from a low of 23% at under $35,000 to 44% at over $130,000 taxable, telling you what the tax would be is also difficult. If you "flip" the unit, the tax would be on the gross profit at those rates. If you rented it for ten year and sold it, the tax would b on 1/2 of the profit as a capital gain.
Selling after one year wouold likley trigger a straight profit ruling.
I no longer manage projects like this.
However Crosby Management at (604) 689-6902 and Ross McDonald at Lighthouse Realty (604) 649-4871 are both set up as property managers for non-resident owners.
The difficulty in getting a mortgage will depend upon both of your credit ratings at the time. Thousands of Americans have bought condos in Vancouver without a Caandian partner. The mortgage company will usually ask for 35% equity but if this unit has gone up what I think it likley has for you, you may have your 35% in the increased value alone.
QUESTION: Hello,
I would appreciate your advice on the following issue:
I am a Canadian resident. Two years ago, I bought a pre-construction apartment in Vancouver jointly (50%-50%) with an American friend of mine who is resident in California with a view to rent it out after completion in 2008. The price of the unit we bought has since gone up considerably.
I have recently come across an article that managing the tax situation could be very complex in our case. I would appreciate if you could advise the steps we should take before and after the completion,renting,and eventually selling of the property. Also, how much would the withholding taxes be if we decide to sell after a year of renting it out or alternatively before renting at all right after completion, or before completion as an assignment. Moreover, I am wondering whether the fact that my partner is American and US resident would complicate my tax situation or obtaining a mortgage from a Canadian bank to finalise the purchase, or both.
Finally, how much would it cost for the matter to be managed by an accountant/tax expert (yourself?)throughout the life of the project.
I look forward to receiving your response.
Many thanks.
Sincerely,
---------------------------------------------------------------------------
david ingram replies:
I apologize but this question is far too complex for this free forum. I could spend two hours and still miss the correct answer because I don't have all the facts.
I suggest that the two of you book a conference call with me. The cost would be $424 Canadian for an hour and could likely be dealt with in that time.
Since the tax paid is a progressive tax running from a low of 23% at under $35,000 to 44% at over $130,000 taxable, telling you what the tax would be is also difficult. If you "flip" the unit, the tax would be on the gross profit at those rates. If you rented it for ten year and sold it, the tax would b on 1/2 of the profit as a capital gain.
Selling after one year wouold likley trigger a straight profit ruling.
I no longer manage projects like this.
However Crosby Management at (604) 689-6902 and Ross McDonald at Lighthouse Realty (604) 649-4871 are both set up as property managers for non-resident owners.
The difficulty in getting a mortgage will depend upon both of your credit ratings at the time. Thousands of Americans have bought condos in Vancouver without a Caandian partner. The mortgage company will usually ask for 35% equity but if this unit has gone up what I think it likley has for you, you may have your 35% in the increased value alone.
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